François Villeroy de Galhau, a member of the European Central Bank Governing Council and head of the Bank of France, has warned that recent U.S. policy choices are eroding global investor confidence and weakening the foundations of the U.S. dollar’s dominant role in the global economy.
According to Villeroy, a series of policy actions have begun to challenge the structural pillars that have historically supported trust in the dollar.
Pressure on Federal Reserve Independence
One major concern highlighted by Villeroy is growing political criticism of the U.S. Federal Reserve. He argued that public attacks on the central bank by the U.S. administration raise doubts about its independence and institutional stability, which are core components of confidence in the dollar.
Any perception that monetary policy could become politically influenced risks undermining the credibility of the U.S. financial system in the eyes of global investors.
Tariffs and Reduced Global Integration
Villeroy also pointed to protectionist trade policies, particularly the use of tariffs, as a factor weakening the dollar’s position. He noted that reduced integration with the global economy encourages other countries to reassess their dependence on a dollar-centered system.
As trade relationships fragment, incentives increase for diversification away from dollar-based settlement and reserves.
Fiscal Discipline and Debt Concerns
Another pillar under strain, according to Villeroy, is U.S. fiscal discipline. Persistently high deficits and concerns about long-term debt sustainability are prompting market unease.
These doubts weaken the safe-haven status traditionally associated with U.S. Treasuries, which in turn undermines confidence in the dollar itself.
Weaponization of Dollar Payments
Villeroy warned that fears of the “weaponization” of the dollar-based global payments system, particularly through sanctions, are accelerating efforts by some jurisdictions to develop alternative financial infrastructure.
In response, several countries are exploring new payment systems and diversifying reserve holdings to reduce exposure to potential geopolitical risks tied to the dollar.
Toward a More Multipolar System
While emphasizing that the dollar remains the world’s dominant currency, Villeroy said these trends are contributing to a gradual shift toward diversification. Some central banks are increasing allocations to gold and non-traditional reserve currencies as part of this process.
He suggested that a more multipolar international monetary system could ultimately prove more stable. In that context, Villeroy argued that the idea of creating a euro-denominated safe asset deserves renewed attention as a potential alternative in the evolving global financial landscape.
Overall, his remarks underscore growing concern among European policymakers that U.S. policy decisions may have long-term consequences for global monetary stability.
